The Theory of Interest: As Determined by Impatience to Spend Income and Opportunity to Invest It

by Irving Fisher

Few American economists have exerted an international influence equal to that of Yale professor Irving Fisher (1867-1947) who excelled as a statistician, econometrician, mathematician, and pure theorist. Of his 18 published volumes on economics, those in monetary economics constitute his most enduring contribution; indeed much of Fisher's work on capital, interest, income, money, prices and business cycles has been incorporated into modern analyses.

Of all his works, 'The Theory of Interest' (1930) is especially significant; not only does it contain his celebrated 'impatience' theory in which the rate of interest is shown to be dependent upon all other elements involving productivity, time preference, risk and uncertainty, but also a strikingly original explanation of the broader capitalistic process with all its interdependencies.

Genres: Economics, Finance, Nonfiction, Business, Money, Unfinished

566 pages, Paperback

First published June 1, 1930

About the author

Irving Fisher was an American economist, inventor, and social campaigner. He was one of the earliest American neoclassical economists, though his later work on debt deflation has been embraced by the Post-Keynesian school.
Fisher made important contributions to utility theory and general equilibrium. He was also a pioneer in the rigurous study of intertemporal choice in markets, which led him to develop a theory of capital and interest rates.[4] His research on the quantity theory of money inaugurated the school of macroeconomic thought known as "monetarism." Both James Tobin and Milton Friedman called Fisher "the greatest economist the United States has ever produced."
Fisher was perhaps the first celebrity economist, but his reputation during his lifetime was irreparably harmed by his public statements, just prior to the Wall Street Crash of 1929, claiming that the stock market had reached "a permanently high plateau." His subsequent theory of debt deflation as an explanation of the Great Depression was largely ignored in favor of the work of John Maynard Keynes. His reputation has since recovered in neoclassical economics, particularly after his work was revived in the late 1950s and more widely due to an increased interest in debt deflation in the Late-2000s recession. Some concepts named after Fisher include the Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem.

Reviews

[Ravajappa Gouda · Rating 3 out of 5]

Very well narrated albeit bit verbose. It must have been way ahead of its time in early 1900s. Many of the things are still relevant but most of the details are being aware in the current business world, you don't have to read it to know it.

[adhy ramawan putra · Rating 4 out of 5]

Buku ini menjadi dasar bagi perkembangan teori investasi modern, dalam buku ini memuat sumbangan besar Fisher bagi teori-teori berikutnya yakni pemikiran Keynes. Beberapa konsep penting yang digaungkan oleh fisher antara lain : marginal rate of return over cost yang di formulasi ulang oleh Keynes menjadi Marginal efficiency of capital yang merupakan konsep dasar dari pemahaman investasi. Preferensi waktu yang di bahas oleh Fisher yang tidak lain mengenai aspek psikologis seperti "human impatience" mampu menjadi dasar pemikiran bagi teknik analisis investasi mengenai present value dan future value, selain itu Fisher menyimpulkan bahwa tingkat bunga merupakan faktor penentu dari investasi, yang dimana terdapat hubungan negatif antara tingkat bunga dan investasi.

[Grace Appler · Rating 4 out of 5]

The thinking was probably ahead of its time and the articulation clear. The gist of the book can be summarized by its title, so not sure if all 500+ pages are worth the time. Although I appreciate how fundamental the issue is, I dont fully understand either the theoretical or practical implications of the main points of the book.

[Yao Dong · Rating 4 out of 5]

The way Fisher derived the theory of interest from the intuitive concept of impatience is simple and easy to understand. It grows into a complex and, even from today's perspective, modern theory of interest. But in many cases, where it's not necessary the examples are too detailed, adding a bit redundancy.